This address points up the critical educational challenge facing state governments today. Stressing the notion of partnership between the Federal and state governments, it notes that states have particularly important opportunities for action in the areas of finance, administration, and leadership. State governments must establish a minimum baseline of educational quality and must tax sufficiently to maintain it. In terms of administration, strong independent state boards of education are necessary, with a strong executive and with freedom from political intrusion. State leadership in education should involve the creation of a positive climate and emphasis. Such leadership should also create conditions which stimulate and encourage educators to innovate and improve the schools. (NH)